The disappointing data is here: Japan GDP (seasonally adjusted) for Q4, preliminary: 0.3% q/q (vs. expected 0.7%)
1. The fourth quarter figure is a disappointment for Abenomics
- expectations were for growth exceeding 3% in the third and fourth quarters, following a 4% expansion in 2013′s first two quarters
- But July-September and October-December have undershot expectations – a clear deceleration of the Japanese economy
- Compared internationally – the 1.0% growth is weaker than the 3.2 % growth in the U.S. and 1.1% growth recorded in the euro zone during the same quarter .. the annual 1.6% growth comes in bit below 1.9% for the U.S., but much stronger than a 0.4% contraction for the euro zone
2. The unexpectedly weak growth may increase pressure on the Bank of Japan to expand its monetary easing measures
- The slow GDP figure could refuel expectations for additional easing steps in the coming months from the BOJ … especially as the economy is sure to slow down after an April sale tax increase
3. Private consumption, which had been Japan’s growth engine in the past year, grew 0.5% from the previous quarter, below the 0.7% increase on average expected
- The front-loading of buying ahead of the sales tax rise in April hasn’t eventuated to the extent expected … likely due to wage growth being slow
4. Surge of imports, flaccid exports
- Imports which grew 14.9% … exports … meh at a slow 1.7%
5. Still weak capital spending
Corporate investment grew for the third straight quarter, but only a modest 5.3%
- Leading indicators for capital spending flagging a warning sign lately, the outlook for capital spending remains uncertain
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What can we expect to see and hear over coming days, weeks, months?
- Increased pressure for wage hikes from the administration – combined with more calls for tcorporate tax cuts.
- Calls for more BOJ action
